Just when you thought you’d ticked all the right boxes by having plentiful uses of 'disruption' and 'innovation' in your pitch deck, a new buzzword comes along and it’s back to the drawing board. Increasingly investors now want to see the 'impact' your business is having on wider society, so much so that a new wave of specialised funds are fuelling growth in areas that were once neglected...
As we have discovered throughout this series, Denver is now one of America’s top destinations for fledgling entrepreneurs and has a community active in supporting business practices that look for more than just a healthy return on investment. With this in mind we decided to head to Downtown Denver and pay a visit to the Colorado Impact Fund, which made its first investment in the summer of 2015 and is exclusively backed by money based in the state.
People putting money behind organisations that make a positive impact on society is nothing new, however the formation of impact funds is somewhat of an emerging trend. So what are the motivating factors behind this shift?
Why are impact funds being setup?
"Impact funds are a new asset class. While this asset class is already at the £60 billion stage and growing fast, it’s still absolutely tiny compared to the rest of the capital out there.” explains Ryan Kirkpatrick, partner at the Colorado Impact Fund.
"It’s growing as there’s a capital shift taking place in the marketplace, lots of family offices and high net worth individuals are starting to shift their philanthropic dollars into impact funds. They’re saying 'hey, I get a negative 100 per return on these dollars – are there vehicles out there where I can put this money, get a market rate return and still have a positive community impact?'. It’s a model that seems a lot more sustainable."
The growth of impact investing is underlined by the findings of a report by Triodos Bank, which found that the figures have been steadily increasing each year since 2012. Back then there was a global commitment of $8 billion, in 2013 this was increased to $10.6 billion and 2014 saw a total of $12.7 billion set aside for impact projects. Typically much of this capital will move around traditional financial strongholds such as London and New York, which is why the work of local impact funds such is increasingly important.
The impact on local businesses
"Impact investing is a pretty local game, you look where the big Silicon Valley VC’s invest and it tends to stay in California. The idea of the fund is to allow people here in Colorado to invest in Colorado companies that are generating a market rate return, but also having a positive community impact. There are four areas that we’re looking to focus on; improving community health, conservation of natural resources and clean energy, education and economic development," notes Kirkpatrick.
"One of the areas that local entrepreneurs need help is capital and that’s hopefully where we’re able to help. There used to be a more vibrant venture capital ecosystem here in Colorado but in 2008 it took a big hit, the entrepreneurial activity here is super strong but the capital to back it up is really lacking."
A look at the Colorado Impact Fund portfolio underlines the diversity of their investment strategy, with value being found in a number of different key industries across the state.
Here are three examples of start-ups who have benefitted, that may have otherwise struggled to find the capital they needed to grow.
Schoolrunner is a comprehensive student data system that gives teachers and schools one place to track everything they care about. The platform aggregates student data across academics, behaviour, attendance and communication in a single place that is easy for teachers and administrators to interpret and analyse.
In 2007, Bhakti Chai was born with the vision of fusing sustainably sourced ingredients, artisan craft-brewed products and the values of triple bottom line business. This vision and leadership continue to permeate the company’s spicy blends by championing women and girls through charitable contributions and scholarships and blending beverages into a crusade for a better world.
Galvanize provides educational programming in data science, web development, data engineering and related fields, as well as co-working space on six urban campuses – four in Colorado, one in Seattle and one in San Francisco. Galvanize’s immersive 12-to 24-week courses are market leading offerings that result in high placement rates in jobs with high base salaries.